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Note 17 - Acquisition of Businesses

12 Months Ended

Dec. 31, 2020

Business Combination Disclosure [Text Block]

NOTE 17 – Acquisition of Businesses:

CID Resources

On May 2, 2018, the Company acquired CID Resources, Inc. (“CID”), a Delaware corporation, which manufactures medical uniforms, lab coats, and layers, and sells its products to specialty uniform retailers, ecommerce medical uniform retailers, and other retailers.

The purchase price in the acquisition consisted of the following: (a) approximately $84.4 million in cash at closing, (b) the issuance of 150,094 shares of the Company’s common stock to an equity holder of CID, and (c) $2.5 million in cash as a result of the cash and working capital adjustment.

Fair Value of Consideration Transferred

A summary of the purchase price is as follows (in thousands):

Cash consideration at closing	$	84,430
Superior common stock issued		3,763
Cash and working capital adjustment		2,521
Total Consideration	$	90,714

Assets Acquired and Liabilities Assumed

The total purchase price was allocated to the tangible and intangible assets and liabilities of CID based on their estimated fair values as of May 2, 2018. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was allocated to goodwill.

The following table presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of CID based on their estimated fair values as of the effective date of the transaction (in thousands):

Cash	$	1,360
Accounts receivable		9,657
Prepaid expenses and other current assets		1,248
Inventories		28,895
Property, plant and equipment		1,134
Contract assets		2,535
Identifiable intangible assets		41,020
Goodwill		20,323
Total assets	$	106,172
Accounts payable		5,030
Deferred tax liability		9,461
Other current liabilities		967
Total liabilities	$	15,458

The amounts in the table above are reflective of measurement period adjustments made during the second quarter of 2019, which included an increase of $2.4 million to goodwill, a decrease of $1.8 million to inventory, and an increase of $0.6 million to accounts payable. The measurement period adjustments did not have a significant impact on the Company’s statements of comprehensive income or cash flows. The Company finalized the purchase price allocation of CID during the second quarter of 2019.

The Company recorded $41.0 million in identifiable intangibles at fair value, consisting of $26.0 million in acquired customer relationships, $0.8 million for a non-compete agreement and $14.2 million for WonderWink trade name. The intangible assets associated with the customer relationships are being amortized for fifteen years beginning on May 2, 2018 and the non-compete agreement is being amortized for five years. The trade name is considered an indefinite-life asset and as such is not being amortized. The Company recognized amortization expense on these acquired intangible assets of $1.9 million, $1.9 million and $1.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities. This goodwill will not be deductible for tax purposes.

For the year ended December 31, 2018, the Company incurred and expensed transaction related expenses of approximately $2.1 million. This amount is included in selling and administrative expenses on the statements of comprehensive income.

On a pro forma basis as if the results of this acquisition had been included in our consolidated results for the entire year ended December 31, 2018, net sales would have increased by approximately $22.3 million and net income would have increased by $2.7 million or $0.17 per share.